The Dreamcast was the first 128-bit console on the market and came from Sega. Stories of this console started appearing on several Internet sites on March 12th 1997. It was originally rumoured to be a 64-bit upgrade for the Sega Saturn, code-named Eclipse, but by March 31st, this story had changed and it was now believed that Sega was planning a completely new, separate console.

By June 1997 it was known that Sega had two different design specs for consideration to become the new console, one code-named Black Belt, and the other code-named Dural. They were almost identical apart from processors (Black Belt having an IBM/Motorola PowerPC 603e CPU with 3Dfx Voodoo2 graphics chipset and Dural having a Hitachi SH-4 CPU with NEC/Videologic PowerVR2 graphics chipset) and matched well with the specs of Sega's newest arcade board code-named NAOMI.

It soon came time to decide on which one was to be used as the final console. Sega chairman, Isao Okawa, ordered for both designs to be made so they could better evaluate the two. Sega of America went with the Black Belt design, but Sega of Japan went with the Dural design. They finally decided on the Dural design (renamed Katana and given 16MB of Video RAM rather than 8MB, allowing better graphics rendering capabilities). The console boasted that it was easy to produce games for and so it quickly gained a lot of third party support.

Sega worked with many other companies to produce this machine including Microsoft, Hitachi, NEC, Video Logic and Yamaha. The console is Windows CE compatible and can run the Internet with its built-in 56K modem allowing you to play games over the Internet or browse the net using the optional keyboard/mouse. In Australia, this Internet access was provided exclusively through Telstra Big Pond. The Dreamcast can also run emulators.